Retirement Myths: FEHB Premium Increases After Retirement

Why is it that many federal employees think that FEHB costs increase? The authors provide some answers.

This article is part of a series dealing with common misconceptions about federal benefits and retirement.  These articles are written by John Grobe and Ehren Clovis.

Myth-conception: Once I retire, I will have to pay more for my Federal Employee Health Benefits, as Uncle Sam’s contribution decreases.

Reality: With the exception of those who receive an extra agency contribution to their FEHB premiums, I will pay no more as a retiree than I do as an employee. I will, however, pay out of after-tax dollars.

Though many people believe that the costs for Federal Employee Health Benefits increase after retirement that is not the case for most employees.  Why is it that many federal employees think that FEHB costs increase?  Probably the fact that in the private sector (for those lucky enough to receive health insurance after retirement), premiums tend to increase, sometimes dramatically.  Even many other public sector plans have costs that increase after retirement.  The FEHB is unusual in that there is no change in the premium amount.

Over the course of a year, the vast majority of federal retirees will pay the same amount for FEHB as current employees pay.  Retirees will pay on a monthly basis, as opposed to bi-weekly, but, at the end of the year, the amount they pay for FEHB premiums will be the same as that paid by an active employee.  There is a difference though; they will be paying out of already taxed dollars.  Retirees, unlike employees, are not allowed to participate in “premium conversion”, where their FEHB premiums are paid from pre-tax dollars.  Retired law enforcement officers, however, are allowed to deduct up to $3,000 of health insurance premiums on their federal income tax.

Some federal employees will see an increase in what they pay for their FEHB.  Those employees are employed by agencies (such as the Securities and Exchange Commission and the Postal Service) that have an extra employer contribution toward their FEHB.  Upon retirement, any extra contributions (that are the result of provisions in the collective bargaining agreement) cease.

Although FEHB premiums do not increase for retirees, those retirees who elect Medicare Part B at age 65 will have to pay Part B premiums (at least $104.90 per month in 2013).  Federal civilian retirees are not required to elect Part B.  Military retirees who are enrolled in Tricare for Life are required to elect Part B.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at to discuss schedules and costs.

About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.